what are the reasons for global shift of manufacturing industry

Question 1

reasons for global shift of manufacturing industry

Answer 1

lower production cost

• relative labour cost
• expense on research and development
• transport cost

improvement of technology

• information and communication technologies (ICT)
• transport facilities

Question 2

relative labour cost

Answer 2

there is difference in the cost of labour among different countries. labour cost are much lower in less developed countries with large population, like china and india. many TNC therefore moved their low-skilled and labour-intensive industries to these countries

Question 3

expenses on research and development

Answer 3

Research and development (R&D) is important for TNCs to maintain their competitiveness. as it is costly, many TNC moved their production processes to LSCs to reduce production cost. Some of them also set up R&D centres in LDCs such as India as the wage level of local professionals is lower

Question 4

transport cost

Answer 4

by moving the production lines to LDCs, the TNCs can use local raw materials for production. At the same time, finished products can be sold in the local market directly. the transport cost is thus greatly reduced

Question 5

information and communication technologies (ICT)

Answer 5

the use of video-conferencing and email enables the headquarters of companies to manage their regional offices and production plants effectively

Question 6

transport facilities

Answer 6

bulk carriers and containers make the transport of raw materials and finished goods cheaper

improvement in air transport allows faster transport of goods and people. factories can thus be set up in locations further away from the markets